by Calculated Risk on 1/06/2011 07:29:00 PM

From National Federation of Independent Business (NFIB): Small Business Hiring Stagnant in December; Likely to Improve in 2011

“Reports of net job creation continued to oscillate around the “0” line in December. Asked about changes in total employment over the last three months, 13 percent of owners reported increasing employment at their firms by an average of 3.5 workers while 14 percent reported (down two points from November) reducing total employment an average of 2.9 workers per firm. Clearly, December showed no surge in small business hiring. ... Still, the percentage of owners reporting higher employment levels is the second highest reading since December 2007...

“The good news is that the two job creation indicators, job openings and job creation plans, both reached new recovery highs. The percent of owners reporting hard to fill job openings rose four points to 13 percent, the best reading in 24 months. Plans to create jobs gained two points, rising to a net 6 percent of all owners, the best reading in 27 months. These indicators point to a pickup in job creation activity for the first quarter of 2011. However, the small business sector continues to underperform on job creation in this recovery compared to other recovery periods.”

NFIB will release their December Small Business Optimism survey on Tuesday.

Note: Small businesses have a larger percentage of real estate and retail related companies than the overall economy, so it is no surprise that hiring has lagged.

by Calculated Risk on 1/06/2011 04:33:00 PM

The BLS will release the December Employment Report at 8:30 AM tomorrow. The consensus is for an increase of 140,000 payroll jobs in December, and for the unemployment rate to decline to 9.7% (from 9.8% in November).

Gregg Robb at MarketWatch reports there have been some upward revisions: Optimism over government’s job report grows

Economists polled by MarketWatch are now expecting 175,000 nonfarm jobs created in December, up from 143,000 just a few days ago.

The unemployment rate is expected to remain steady at 9.8%.

Click on graph for larger image in graph gallery.

This graph shows the net payroll jobs per month (excluding temporary Census jobs) since the beginning of the recession. The estimate for December is in blue.

Last month the BLS reported a disappointing 39,000 jobs added in November. That was significantly below expectations of 145,000 jobs.

However - as always - we should be careful not to read too much into any one month of data. A good example was in 1997. The economy added 280,000 jobs per month on average, but in August 1997 the BLS reported a decline of 18,000 jobs! Was the employment boom over? Nope. The following month the BLS reported a gain of 508,000 jobs.

And that also suggests the possibility of some bounce back from November (or an upward revision to the November payroll numbers).

Here is a look at a few of the recent employment related reports:

• ADP reported Private Employment increased by 297,000 in December, the largest gain ever for the ADP series (started in 2001). This was well above expectations of 100,000 private sector jobs - and there is widespread skepticism that the economy actually added anywhere near that number of jobs. Andrew Tilton at Goldman Sachs noted yesterday:

[W]e view the dramatic improvement shown in the ADP report with skepticism ... while we do expect a meaningful pickup in employment growth in 2011, we have not changed our forecast of a 100,000 increase in nonfarm payrolls in December.

• Weekly initial unemployment claims were down significantly over the last couple of months.

The average over the last 5 weeks was 413,000 initial claims per week.

This was down sharply from the October the average of 456,000, and the November average of 431,000.

• However the ISM indexes showed slower employment growth.

The ISM manufacturing manufacturing Employment Index registered 55.7 percent in December, 1.8 percentage points lower than the 57.5 percent reported in November. The ISM Non-manufacturing employment index showed slower expansion in December at 50.5%, down from 52.7% in November.

• The Job Openings and Labor Turnover Survey has been showing an increase in job openings.

This data is only through October.

The yellow line (job openings) has been increasing steadily since early last year.

Overall I think the labor market is improving. Anything less than the addition of 100,000 nonfarm payroll jobs would be disappointing, and there appears to be the potential for an upside surprise. However I expect little change in the unemployment rate.

by Calculated Risk on 1/06/2011 02:03:00 PM

From the WSJ: EU Proposes Plan for Bank Failure

The EU executive arm, the European Commission, Thursday released a hefty 100-plus page consultation paper open to public comments until March 3, which aims to abolish the excuse that a bank is too big to fail. It asks whether bank bond holders should share in paying for future bailouts ...

[A] diplomat added: "The overriding objective is to make sure creditors bear the appropriate share of losses of a failing bank and these aren't immediately passed along to taxpayers."

Here is a look at European bond spreads from the Atlanta Fed weekly Financial Highlights released today (graph as of Jan 4th):

Click on graph for larger image in new window.

From the Atlanta Fed:

Greek, Irish, and Portuguese bond spreads (over German bonds) continue to be elevated, rising since the December FOMC meeting.

Since the December FOMC meeting, the 10-year Greek-to-German bond spread has widend by 105 basis points (bps) (from 8.85% to 9.90%) through January 4.

Similarly with other European peripherals’ spreads, Portugal’s is 38 bps higher, and Ireland’s spread is 88 bps higher.

Note: the Atlanta Fed has added Belgium.

The bond yields have increased today. The Portugal 10 year is at 6.96%, the Ireland 10-year bond yield is over 9%, and the Greece 10-year bond yield is at a record 12.64%.

Clearly investors are pricing in a haircut.

by Calculated Risk on 1/06/2011 11:55:00 AM

A weekly update on hotels from HotelNewsNow.com: STR: Luxury segment tops ADR weekly increases

Overall the U.S. hotel industry’s occupancy increased 4.2% to 47.4%, ADR was up 2.3% to US$102.76, and revenue per available room finished the week up 6.6% to US$48.75.

The following graph shows the four week moving average for the occupancy rate as a percent of the median occupancy rate from 2000 through 2007.

Click on graph for larger image in graph gallery.

Note: I've changed this graph. Since this is the percent of the median from 2000 to 2007, the percent can be greater than 100%.

The down spike in 2001 was due to 9/11. The up spike in late 2005 was hurricane related (Katrina and Rita).

This shows how deep the slump was in 2009 compared to the period following the 2001 recession. This also shows hotels are recovering, but the occupancy rates are still below normal.

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

by Calculated Risk on 1/06/2011 08:30:00 AM

The DOL reports on weekly unemployment insurance claims:

In the week ending Jan. 1, the advance figure for seasonally adjusted initial claims was 409,000, an increase of 18,000 from the previous week's revised figure of 391,000. The 4-week moving average was 410,750, a decrease of 3,500 from the previous week's revised average of 414,250.

Click on graph for larger image in new window.

This graph shows the 4-week moving average of weekly claims since January 2000.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week by 3,500 to 410,750.

In general the four-week moving average has been declining and that is good news.

by Calculated Risk on 1/05/2011 11:59:00 PM

From the WSJ: For Apartments, a Hot Winter

According to Reis data, the national apartment-vacancy rate was 6.6% in the fourth quarter, down from 7.1% in the third quarter and 8% in the fourth quarter a year ago.
...
Effective rent, the amount paid after discounts, rose 0.5% ...

Also from Diana Olick at CNBC: One Bright Spark in US Housing — Apartments

This is a significant decline from the record vacancy rate set a year ago at 8%. This decline fits with the recent survey from the NMHC that showed lower apartment vacancies.

The vacancy rate for large apartment buildings bottomed a year ago, and this indicates the excess housing inventory (that includes both vacant homes and apartments) is being absorbed.

Note: the Reis numbers are for cities. The overall vacancy rate from the Census Bureau was at 10.3% in Q3 2010.